Individuals hold on to US dollar to cash out at better rates

NEW DELHI: Last month, Rakesh Rai sold $500 at a small vend on Delhi's Janpath to mop up over Rs 25,000 and clear a loan he had taken from his roommate. But dealers, mostly unauthorized, on this street full of tourists are complaining that there are few like Rai who are coming forward to sell greenbacks they had saved from an overseas trip.

After all, like traders, even individuals are betting on a further depreciation of the Indian currency. But that spells bad news for foreign currency dealers who are now complaining of a scarcity of dollars, and an increased reliance on banks to meet their requirements.

"Those travelling don't have achoice. It is high season but we are not able to meet demand for dollars and we have no choice but to refuse customers," said Ashok Dua who runs CDS Money Changer. An unauthorized dealer, who did not wish to be identified, said volumes are down nearly 50% this year.

The rupee is losing over 50 paise on a daily basis and forex dealers in banks are already predicting that it will soon hit the 60-mark against the US currency . Over the past 12 months, the rupee is down over 23% and closed at 56 to a dollar on Wednesday. Buyers often flock to outlets such as CDS and even unauthorized money changers in the hope of getting better rates. On Wednesday, when HDFC Bank was selling a dollars at 56.75 and ICICI Bank at Rs 56.57, CDS was charging Rs 56.

When it came to buying the rate at some of the smaller outfits the rate was Rs 55.50 to a dollar , while HDFC Bank and ICICI Bank would give you Rs 53.75 and Rs 55.80, respectively.

The dealers say that even those going abroad are preferring to borrow dollars from friends or dip into their kitty of forex saved from earlier trips to meet their immediate requirements . So the demand to buy foreign exchange is also down.

"Most of the time customers just call in and enquire about the rates. Walk-ins have reduced by nearly 60% in the last 10 days," said a dealer. The only hope is that RBI's steps will start showing an impact over the next few weeks.